Quebec made most of $2B Economic Action Plan infrastructure fund

MONTREAL, QUEBEC; NOVEMBER 24, 2012 -- Construction continues on roads over and under closed overpasses on the north side of Highway 40 in Ste-Anne-de-Bellevue in the West Island of Montreal Saturday, November 24, 2012. (John Mahoney/THE GAZETTE) ORG XMIT: 45234 ORG XMIT: POS1211241634164791

More than half of the money the federal government set aside for a low-interest loans program as part of the Economic Action Plan went to municipalities in Quebec, documents obtained by the Citizen show.

And by far the biggest chunk of the money went to the city of Montreal.

Details of the loans, which were distributed through the $2-billion Municipal Infrastructure Loan Program (MILP) for infrastructure projects, are emerging as such government spending — made through arms-length agencies, in this case the Canada Mortgage and Housing Corp. — is under scrutiny.

The Parliamentary Budget Officer has raised concerns about the oversight of such loans, and pointed to the increasing amount of government spending that’s being done in this way.

While there’s nothing to indicate any wrongdoing in the latest data, the details do raise questions about how municipalities in one province were allowed to take so much of a national fund.

The $2-billion program was part of the infrastructure spending under Canada’s Economic Action Plan. Between 2009 and 2012, the highly touted action plan provided a total of $5.53 billion in construction spending for infrastructure projects, including the MILP money plus various other programs.

Under the MILP, Montreal received $722.4 million in between 2009 and 2012. Quebec City, meanwhile, was granted $326 million in loans.

The two cities alone accounted for $1.05 billion of the $2 billion set aside for the program. As a whole, Quebec municipalities accounted for a total of $1.2 billion.

In comparison, Canada’s most populous city, Toronto, only received $113 million of the MILP funds. The City of Ottawa received $23.7 million for eight projects, including resurfacing roads and building new sidewalks and pathways.

A total of 272 projects received loans across the country.

Brad Duguid, Ontario’s minister of Economic Development, Employment and Infrastructure, said the disparity between Quebec’s level of uptake and that of Ontario municipalities showcases the uneven nature of federal infrastructure spending.

“This just reinforces the cries for a national infrastructure partnership that is transparent,” Duguid said. “There doesn’t appear to be any rhyme or reason. It’s a hodgepodge attempt to invest in infrastructure across the country. What we need is a well thought-out plan.”

Officials from the CMHC said the money was simply handed out as municipalities that met the criteria applied.

“Municipalities submitted loan applications which were approved on a first-come, first-served basis provided the application was complete when submitted and the project met the eligibility requirements,” said Karine LeBlanc, a spokeswoman for CMHC. “This continued until all available funds were committed.”

Of the 289 applications received, CMHC approved 272. No loans are currently in arrears, the corporation says. The terms of two loans — both in Ontario — have been renegotiated.

Meagan Murdoch, a spokeswoman for Pierre Poilievre, minister of Employment and Social Development, the department which is responsible for CMHC, said the corporation has assured her that all Canadian municipalities were given “equal access” to the program, and that CMHC is responsible for collecting loan payments from all the municipalities involved.

In Quebec, where all federal funding is disbursed by provincial agencies, the program was administered by Financement-Quebec and the Ministry of Municipal Affairs, Regions and Land Occupancy. A spokesman for Financement-Quebec said a main reason the province did so well in collecting money from the fund is because it had a provincial agency promoting the availability of the money.

The MILP gave out low-interest loans to municipalities on 15-year terms. The interest on the loans was calculated based on their risk and dollar value.

The funding was spent on a variety of projects “intended to encourage municipalities’ initiatives to fund their housing-related infrastructure projects,” according to the CMHC.

The City of Montreal received funding for a total of 12 projects, according to documents provided by CMHC. The money received by Montreal from CMHC was equal to about 50 per cent of its infrastructure spending in 2013.

Included among the city’s projects:

• $8 million for a new fire hall,• $25.9 million for treating drinking water,• $178.3 million for road construction,• $58.5 million for “residential green space”• $132.9 million for roads

Quebec City also received funding for a total of 12 projects, including:• $83.5 million for new sewer systems and• $58.1 million for road construction.

The Parliamentary Budget Officer has said members of Parliament and senators may not be fully aware of the magnitude of funding from these types of loans.

Between 2002 and 2003, supplementary estimates show loans accounted for about $40 billion of federal government spending, compared with the $161 billion that year in funding approved by Parliament.

By the 2013-14 fiscal year, that amount had risen to $211 billion, compared with the $239 billion in regular spending.

In other words, the amount issued in loans has skyrocketed since the financial crisis of 2008, peaking at more than $306 billion in 2009-10, and now sits at levels roughly equal to the value of Canada’s annual budget, according to the Parliamentary Budget Officer.

The total of the loans include spending from CMHC but also from other sources such as Export Development Canada, Farm Credit Corp. and the Business Development Bank of Canada, among other federal agencies.

While government votes to pass a loan package, the package typically isn’t revisited by Parliament to see where those loans went or for how much or whether they are being paid back.

“The magnitude of these non-budgetary transactions grew prodigiously over the past five years, as part of the Government’s response to the 2008 global fiscal crisis,” reads a recent report on the budget officer’s website, adding that ultra-low interest rates have made it easier for the government to borrow. As interest rates have fallen in recent years, the amount the government has to allocate for so-called debt spending decreases, making the payments seem more manageable.

The CMHC is facing scrutiny for one of the two MILP loans it has renegotiated.

Blind River secured a loan in 2010 for a large scale solar energy project, which was later cancelled by the Ontario Power Authority. The town moved forward with a number of smaller-scale solar developments, 71 in all, totalling about $25 million worth of investment. It invested the rest of the money in Plasco Energy Group, the beleaguered Ottawa waste-to-energy firm that is seeking protection from its creditors in court under the Companies Creditors Arrangement Act.

Questions have been asked about how Blind River qualified for the $49.5 million loan, given that it’s a town of only 3,500 people and has annual revenues of $8.8 million.

According to CMHC, municipalities are responsible for acquiring all necessary approvals to take out a loan. The municipality is also responsible for ensuring it meets the loan terms and conditions pertaining to spending.

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